Manulife Financial (MFC.TO)

In lifecos, this would be his favourite. It has the best growth including Asian growth. The catalyst will be that their spreads will widen as rates go up. They are not as sensitive to others as they hedged out in 2008-2009 when rates hit. Starting to give dividend increases which will become more regular. This will give you 8%-10% returns instead of the 5% that we have had.

Every year we think interest rates are going up and then they don`t. The insurance companies have these guaranteed products from `08. She likes this one and the banks as well. This one is in a holding pattern.

Has been pretty frustrating with some pretty big swings between $19 and$22. These business models want 2 things to happen. 1.) Interest rates moving higher and 2) the stock market moving up. These are the 2 biggest inputs.

You think of most financials as benefiting from high interest rates, as they are able to capture a higher spread when rates are rising. People like this one as they have a substantial business in the US. They are also able to grow in Asia. As long as you have lower and declining interest rates, that is a headwind for them.

Canadian banks or Manulife (MFC-T)? Until recently, he thought lifecos showed relatively better valuation than banks. The environment has got to the point now where flight to safety might be tilting a little bit more towards banks. Management has done a superb job since they were in trouble previously and had to cut their dividend. Have changed their product mix so that it is a lot less risky and less exposed to equity markets. Have really built up the wealth side of their business giving them good fees. Expanded in the US through John Hancock and are expanding into Asia quite a bit. A very good long-term hold.

(A Top Pick Nov 4/14. Up 5.2%.) This has to decouple from the interest rate outlook to the value proposition. He thinks there is still upside on the stock. From a pure Book Value, pure Coverage Ratio and pure Earnings Power with its exposure to Asia, it still looks interesting to him.

The lower oil prices hurt some of the holdings. Business in Europe is picking up. Once you have had your fill with bank stocks, take a look at this one.

Just sold his holdings and switched into Sun Life (SLF-T). Both are very fine companies. Sun Life has a little bit higher yield, but trades at a little higher multiple. Both companies will benefit from an eventual increase in rates.

All lifecos will benefit in a rising interest rate environment. Recent earnings reported were not that fantastic and thinks this has to do with the historic volatility of their earnings. Doesn’t think the market is giving the lifecos the benefit of the doubt, but there is no question that this is a good way to play a rising rate environment.

Stock vs. Stock. MFC-T vs. SLF-T. MFC-T has 10% earnings growth for the next couple of years and SLF-T is a little less than that. Times like this are a buying opportunity.

Metrlife (MET-N) or Manulife (MFC-T). Which has a better upside? All things being equal, and if she liked both of them equally, she would prefer the Canadian stock because of the currency. They have good business in Asia which, longer-term, is going to be a good growth area. Lower interest rates are going to be a headwind, but that is a non-core issue. Valuation is not onerous and it provides an attractive yield.

It is going to be hard for all of the insurance companies to break out of this rut in the current conditions. (See comments under Prudential (PRU-N).)

If interest rates rise, this will work. If they don’t, it will stay in the same range. Excellent company. The company has been de-risked to such an extent that the increase in equities hasn’t really driven the company to a higher level. Because of this, he prefers Sun Life (SLF-T). If you have a longer-term outlook, this is fine.

Given where interest rates are, it is getting more and more difficult for these insurance companies to deliver on products that promise to payout a high rate for decades.

The stock had a really good run over the last couple of years. They are very levered to higher interest rates. The story got a little ahead of itself. A better growth profile than the banks. He has no trouble holding it.